Purchasing a second house

Question from Greg updated on 8th September 2017:

We are looking at moving to another area and renting out our current house. But we don't know which way would be better to purchase our next house as we don't want to rent. Does it pretty much come down to getting a deposit together or using equity in our current property? We only have a small amount to go to pay our current mortgage off and renting the house out won't be hard as we've already had feelers out with interest shown.

Our expert Kris Pedersen responded:

My recommendation is that, ideally, you want to end up holding as much debt against your current residence (which will become a rental) as you can. Then move as much equity as possible into your new purchase. It is also worth taking tax advice in regards to the optimum ways to structure this as if done effectively you could get some benefits here. You should be potentially able to get set up with a revolving credit facility so you have access to deposit funds and then a pre-approval for the remaining funds to complete the new purchase.

Kris Pedersen of Kris Pedersen Mortgages is a commentator on property and finance. His team sources top finance strategies. www.krispedersen.co.nz